Articles From the Team

Top 10 tips for preparing an effective ‘in-house budget’

Very apt for last week’s budget day I attended a talk by Nicola Williams, Head of Legal at Welsh Water and Stuart Couch of PWC. The talk was titled: How to run an in-house legal team like a business.

I won’t convey the whole talk but thought it would be useful to share their “Top 10 tips for preparing an effective in-house budget”.

1. Involve the whole team
2. Keep accruals to a minimum
3. Spend time estimating likely costs and considering outturns for issues
4. Consider holding contingency sums centrally rather that allocated budget
5. Consider whole costs of transactions, including legal and other advisors
6. Look for fixed fee arrangements with external law firms for routine or transactional work
7. Regular tenders/ negotiations on rates/ best value for offerings from external firms
8. Holding budgets centrally – absolute clarity around totality of legal budget versus commissioned approach – business ownership/input on strategic issues
9. What is the policy for outsourcing work and is this clearly understood?
10. Review progress regularly

From my dealings with GC’s and especially when it comes to first time appointments I would suggest that point 1 above, ‘involving the whole team’ is a crucial and sensible place to start, as is the GC’s decision on how he or she decides to manage the legal department’s workload. An initial determination of how to allocate resources, evaluate performance and establish success is hard to understand unless the totality of the work in the department is collected and understood. Often a first priority should be a system to track the entirety of legal work carried out across the business. Once you know what work is being done and by whom you can then prioritise projects and allocate resources accordingly and therefore budget!

All departments these days must justify their existence in a measurable way and legal departments are no different. In-house lawyers who do adopt the best practices of other successful business units within the company will find themselves better able to advise their clients, and will also be seen as trusted advisers when important decisions are being made within the company.